Sterling Hits Three-Week High on Positive UK Retail Sales Data

Sterling climbed to a three-week high, bolstered by positive UK retail sales data and a broad recovery in risk appetite. The British pound saw its strongest level against the dollar since July 25, with a marked weekly rise. The Bank of England's cautious approach on interest rates also supported the currency.

Sterling touched a three-week high on Friday, driven by optimistic UK retail sales data and a broad resurgence in risk appetite among investors. Data indicated that British retail sales rose 0.5% in July, partly fueled by extra spending due to the men's Euros soccer championship. This followed a 0.9% dip in June when poor weather impacted shopping activity.

The recent data aligns with UK gross domestic product figures showing a 0.6% increase in the second quarter of 2024, matching economists' forecasts. On Friday, the pound strengthened by 0.4% against the dollar, reaching $1.2904, its highest level since July 25. Over the week, it gained 1.2%, marking its most significant weekly rise in over a month.

The Bank of England's decision to lower interest rates from a 16-year high, combined with improved consumer confidence, has bolstered the pound. Traders are now anticipating fewer interest rate cuts from the BoE compared to the Federal Reserve, lending further support to the currency. Globally, encouraging U.S. economic data spurred a rebound in stock markets, alleviating earlier recession fears.